Runaway house prices: the ‘winners and losers’ from the pandemic
In Akron, Ohio, house prices have risen by 10.1 per cent over the past year. In Albany, New York, the increase has been 11.7 per cent. Albuquerque, New Mexico, has seen a similar surge of 11.6 per cent.
And that is just the American cities beginning with an A.
“You could throw a dart at a map and it wouldn’t matter where it landed because the housing market there is probably hot,” says Ali Wolf, chief economist at Zonda, a housing market research company in California.
When the coronavirus pandemic first hit last year, the initial assumption of many politicians was that the economic pain would be shared. This epic event was to be a great leveller. But as governments across the developed world stepped in to protect incomes in ways that have most helped people with steady jobs, the hardship has fallen disproportionately on flexible, low income workers and young people. Suddenly unable to eat out or travel, richer households have used the last year to build up their savings.
Aggregate global wealth accumulated by households rose by about $28.7tn in 2020, according to a report published this week by Credit Suisse, which highlighted the extraordinary disconnect between this growth and the fortunes of the wider economy.
Wealthier households have channelled windfall savings into equities and cryptocurrencies, Louis Vuitton handbags and Dutch masters. But most of all, they have poured money into buying bigger and better houses.
“People didn’t expect this to play out how it did. No one clocked until a few months in that there are clear winners and losers,” says James Pomeroy, an economist at HSBC. Now, the sharp rise in house prices represents “a huge challenge — a problem in terms of financial stability but a huge socio-economic problem too”.